Two women and two men look into the sunset

What is finan­cial free­dom?

Whether you have enough mon­ey to live the life you want depends on what you need and expect.

You’ve prob­a­bly seen adver­tise­ments in which some­one stands in front of a vil­la and tells you about his secret method for becom­ing a mil­lion­aire overnight. Does that seem dubi­ous to you? To us, too. The only real thing about such promis­es is the hid­den desire for finan­cial free­dom. But what does it mean to be finan­cial­ly free? That depends on whom you ask. We all approach this sub­ject with dif­fer­ent pre­sup­po­si­tions. Whether you have enough mon­ey to shape your life accord­ing to your wish­es depends on what you need or what you expect. In the fol­low­ing arti­cle, we would like to take a clos­er look at the ques­tion of finan­cial free­dom. What are the con­di­tions for finan­cial free­dom? How do you ful­fill them? And how can you enjoy your free­dom respon­si­bly?

When are you finan­cial­ly free?

Finan­cial free­dom gen­er­al­ly means: greater self-deter­mi­na­tion. With the mon­ey you have, you are free from the com­pul­sion to do things you don’t want to do. For most, this means that they no longer have to work to finance their stan­dard of liv­ing. A form of pas­sive income, for exam­ple through the invest­ment of cap­i­tal, replaces active income through wage labour. How much mon­ey you need for finan­cial inde­pen­dence depends on your cur­rent fixed costs, i.e. rent, elec­tric­i­ty, cloth­ing, food, etc. You also need to be aware of your per­son­al cir­cum­stances. You also need to be aware of your per­son­al cir­cum­stances. Do you live alone or in a part­ner­ship? Do you have chil­dren or oth­er depen­dents you care for? Do you have a chron­ic ill­ness that caus­es addi­tion­al med­ical costs?
Finan­cial free­dom also means finan­cial secu­ri­ty. If some­thing unfore­see­able hap­pens to you, such as an acci­dent or the loss of a job or a failed invest­ment, you will be glad to have a cush­ion with which you can bridge the loss of income or the addi­tion­al bur­den for a cer­tain peri­od of time.
Con­verse­ly, there may be one thing you want to be able to afford. In the soci­ety in which we live, free­dom of design and action are often depen­dent on your finan­cial pos­si­bil­i­ties. Do you dream of a big­ger flat in a more expen­sive city or a trip to a far­away coun­try? Would you like to ful­fil a project of your heart, open your own café or buy a grand piano to learn to play the piano? What­ev­er it is, whether you want to pre­pare for emer­gen­cies or expand your free­dom of move­ment, to get there you need more than just your earned income in most cas­es.

Counter of a café with products while guests sit in the background
Starting a business, for example a café, can also be a form of financial freedom.

How do you become finan­cial­ly free?

One way: win the lot­tery. Alter­na­tive­ly, you could inher­it a for­tune or find mon­ey on the street. Seri­ous rec­om­men­da­tions are the so-called pas­sive sources of income. In this case, you take a part of your sav­ings and invest it. Through inter­est, div­i­dends and cap­i­tal gains, you can gain more and more finan­cial free­dom. And you can short­en the time to your declared finan­cial goal. If you rely pure­ly on your income from work, toil­ing and toil­ing, you may well have earned enough to lit­er­al­ly retire by the time you are 70, but you would also have less time to enjoy that retire­ment.

Mak­ing mon­ey work for you is a tempt­ing idea. But please don’t go and quit your job straight away. First look around to see what invest­ment options are avail­able. There are two areas of pas­sive income. One is tra­di­tion­al and the oth­er is dig­i­tal. The tra­di­tion­al one is the one from shares, real estate, ETFs or oth­er secu­ri­ties. The dig­i­tal one means that you earn mon­ey with the help of the inter­net. For exam­ple, you could gen­er­ate adver­tis­ing rev­enue through prod­uct place­ments on your own web­site or YouTube chan­nel. You could sell dig­i­tal prod­ucts such as pho­tos or videos or offer dig­i­tal ser­vices such as pro­gram­ming soft­ware or writ­ing blog posts. Final­ly, there’s earn­ing returns through P2P lend­ing. Here, peer-to-peer”, i.e. with­out a cred­it insti­tu­tion as an inter­me­di­ary, invest­ment goes from you to bor­row­ers such as start-ups or oth­er prof­itable projects. In the case of crowd­in­vest­ing, plat­forms like Wat­ti­fy help you with this.

Woman streaming live outside via Gimble
Financial freedom as a content creator

Free­dom and respon­si­bil­i­ty

As you can see, there are sev­er­al paths to your goal of finan­cial free­dom. How­ev­er, there is some­thing else you should be aware of. Achiev­ing your own free­dom can some­times mean lim­it­ing the free­dom of oth­ers. For exam­ple, do you invest in an invest­ment fund that rep­re­sents com­pa­nies in the arms indus­try? Or do you adver­tise a prod­uct on your web­site that vio­lates labour and human rights? One of the great­est suf­fer­ers from our per­son­al free­dom is the envi­ron­ment. Our com­fort­able way of life costs nature valu­able resources. If we con­tin­ue to invest in cli­mate-dam­ag­ing ener­gies such as coal and gas, we are head­ing for a future in which we will no longer be able to do any­thing with the time that our finan­cial free­dom gives us. On the oth­er hand, because of the afflu­ent soci­ety, there are also many peo­ple who are already scal­ing back their demands on them­selves and the plan­et. This can lead to more finan­cial free­dom because it sim­ply costs less to own and con­sume less. This is an excit­ing top­ic that we will explore in our next blog post.

A good alter­na­tive is the agree­ment of returns and sus­tain­able invest­ments. Wat­ti­fy offers you a source of income that takes respon­si­bil­i­ty for our envi­ron­ment. Our sup­port­ed projects are spe­cialised in renew­able ener­gy. Even our blockchain to gen­er­ate your return tokens is car­bon neu­tral. Join us and take the first step towards finan­cial and sus­tain­able free­dom!

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